A scrap over the Superfund law - Environmental Protection Agency laws on hazardous waste

Nation's Business, July, 1992 by David Warner

Scrap-recycling companies view themselves as part of the solution to some environmental problems. But the Superfund law on the cleanup of hazardous-waste sites views many such firms as part of the problem.

Scrap recyclers recently drew the attention of Nation's Business to the Superfund liability issue that has hit their industry especially hard. Their dilemma is that many of them are being held liable for pollution resulting from scrap materials they sold to parties that later disposed of waste related to those materials.

The Superfund law, officially titled the Comprehensive Environmental Response, Compensation and Liability Act, was enacted in 1980 to clean contaminated sites by requiring companies responsible for the pollution to pay cleanup costs.

The act's definition of polluters, however, includes "potentially responsible parties" (PRPs), which are further defined as companies that generate or arrange for the transportation, disposal, or treatment of hazardous substances. Under the law, a host of materials are defined as hazardous substances, including plastics and many metals.

Provisions of the law, administered by the Environmental Protection Agency, say no proof is needed that a PRP's materials or actions directly caused conditions requiring a site's cleanup. To establish a PRP's liability under the law, the EPA need prove only that a company was involved at a site, not that it was negligent in creating it. Another provision says PRPs can be held jointly or individually liable for all of a site's cleanup costs.

Many small companies are especially concerned about the statute's liability system and the broad definition of PRPs to include firms that "arrange for the treatment" of hazardous substances.

The Superfund law's liability provision can be "devastating" for small companies, says Jeff Zimmerman, a partner with the Washington, D.C., law firm of Newman & Holtzinger; its clients include PRPs.

The provision could be the death of many small recyclers, says Tom Wolfe, counsel and managing director of government relations for the Institute of Scrap Recycling Industries, in Washington. He says companies named as PRPs just don't know the amount of their liability.

Wolfe adds that nearly half of the institute's 1,800 members have been or could be responsible for waste sites.

In one case, 800 companies, mostly small scrap recyclers, have been named as PRPs for selling hazardous substances--lead-acid batteries--to a now-bankrupt lead-refining firm that polluted a site in Pennsylvania. The EPA says the PRPs "arranged for the treatment" of hazardous substances. In fact, most of the involved firms merely collected discarded car batteries and sold them--sometimes through other companies--to the Pennsylvania firm. Cleaning up the site will cost an estimated $35 million.

Says the owner of one recycling company in the case: "We do not have control over our consumers' storage procedures or processing methods, and, therefore, we should not be asked to fund the cleanup of a problem we did not create."

The Superfund law has involved many types of firms, such as chemical companies, fertilizer manufacturers, machine shops, metal fabricators, and even banks that lend money for property that later becomes polluted.

Has the law worked? Has it punished polluters and cleaned contaminated sites? Often, the responsible polluter or one who contributed the most waste to a site is unable to pay because the company is out of business or insolvent, says attorney Zimmerman, and other PRPs are thus required to cover the cleanup costs.

The law is "universally unfair," he says. "It's a bad system. Unfortunately, for many sites, it's the only system we have right now to clean them up."

As for cleanups, according to the EPA, only 84 of the 1,275 most polluted sites in the country have been cleaned in the 12 years of the law's existence. More than 200 sites are in the cleanup process.

Because many PRPs feel unfairly pegged as polluters and don't believe they should bear any of a site's cleanup costs, they often sue third parties--their suppliers--for part of the cost. And all parties usually look to their insurance carriers to cover them.

For companies unwittingly caught up in the Superfund law, the question is: Will the PRP system be changed when the Comprehensive Environmental Response, Compensation and Liability Act comes up for reauthorization in 1994?

"We're not likely to see the liability system go away," says Zimmerman. With 34,000 potential sites in the country and no cost estimate for the total cleanup, he says, Congress is unlikely to change the Superfund liability structure.